Australian dollar faces corrective pullback: Elliott Wave

The Australian dollar has extended its weakness against the U.S. dollar (FOREX:AUDUSD) in the past few trading days, but decline from the high still can be considered as a contra trend corrective movement, but more complex than on the first place. We are looking at the double zigzag with a potential test of the 0.9000 region next week before we can finally turn bullish on the Aussie.

AUD/USD Elliott Wave Analysis Daily

On 4-hour chart AUD/USD broke through the former swing low at 0.9266 and has extended down to 0.9120 today, which means the bearish trend is in progress for another three wave fall. We are tracking an A)-B)-C) down from 0.9245, which is a second part of a complex correction, called a double zigzag. If we are correct, then in the next few trading days the market will rally up in wave B), probably back to 0.9230-0.9260 from where the downtrend could resume.

AUD/USD Elliott Wave Analysis 4h

Elliott Wave Education: Double Zig-Zag

Elliott called sideways combinations of corrective patterns double threes and triple threes. While a single three is any zig-zag or flat, a triangle is an allowable final component of such combinations and in this context is called a three. A double or triple three, then, is a combination of simpler types of corrections, including the various types of zig-zags, flats and triangles. Their occurrence appears to be the flat correction's way of extending sideways action. As with double and triple zig-zags, each simple corrective pattern is labeled W, Y and Z. The reactionary waves, labeled X, can take the shape of any corrective pattern but are most commonly zig-zags.

About the Author

Gregor Horvat, based in Slovenia, has been in the forex markets since 2003. He is a technical analyst and individual trader who has worked for Capital Forex Group and TheLFB.com. He also is founder of forex services on www.ew-forecast.com. EW-Forecast.com provides technical analysis of the financial markets, highlighting behavioral patterns based on the Elliott Wave Principle (EWP). Website: http://www.ew-forecast.com/